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Singapore | Publication | janeiro 2024
In October 2022, the Singapore International Commercial Court (SICC)’s procedural rules were amended to provide it with the jurisdiction to hear cross-border corporate insolvency, restructuring and dissolution proceedings. Highly respected restructuring and insolvency judges were also appointed to SICC’s panel of international Judges, to cement Singapore’s position as the Southeast Asian jurisdiction for cross-border restructuring.
On 18 January 2024, a panel of three judges (comprising Justice Christoper Sontchi, IJ, Justice Anselmo Reyes, IJ and Justice Kannan Ramesh) issued the SICC’s first restructuring-related decision in Re PT Garuda Indonesia (Persero) Tbk and another matter [2024] SGHC(I) 1 (Re PT Garuda).
They not only recognised Indonesian flag carrier Garuda Airline (Garuda)’s contested PKPU restructuring despite pending appeals to the Indonesian Supreme Court but also clarified the ambit of the public policy exception under Article 6 of the UNCITRAL Model Law on Cross-Border Insolvency (UNCITRAL Model Law) as amended and adopted in Singapore (Singapore Model Law).
The proceedings in Re PT Garuda were brought by the two foreign representatives of Garuda. They sought amongst other things:
The application was strenuously opposed by a pair of aircraft lessors from the Greylag Goose group (Greylag Entities).
We summarise the key issues raised, and the SICC’s decision below.
The Greylag Entities argued that the recognition proceedings had been commenced prematurely as their appeal to the Indonesian Supreme Court seeking to nullify the Homologation Decision was pending. If allowed, the appeal could lead to the annulment of the entire Composition Plan and affect the very foundation upon which the PKPU Proceeding was recognised.
The SICC was not persuaded by this objection. Its view was that the Singapore Model Law does not require a foreign proceeding to be concluded, or for all avenues of appeal and review be exhausted, before recognition can be granted.
Rather, Article 17 of the Singapore Model Law makes it mandatory for the Courts to give recognition to a foreign proceeding once the substantive and procedural requirements of that Article are met (that these requirements were met was not contested by the Greylag Entities). Whether those foreign proceedings have been concluded is not relevant.
Moreover, it remained open for the Greylag Entities to apply under Article 17(4) of the Singapore Model Law to request termination of the recognition of the PKPU Proceedings and any ancillary reliefs granted in support of recognition, if they succeeded in the pending appeal in Indonesia.
The Greylag Entities’ second objection was that recognition of the PKPU Proceedings would be contrary to the public policy of Singapore, based on Article 6 of the Singapore Model Law, which provides that “[n]othing in this Law prevents the Court from refusing to take an action governed by this Law if the action would be contrary to the public policy of Singapore”.
Crucially, Article 6 of the Singapore Model Law differs from Article 6 of the UNCITRAL Model Law, which provides that “[n]othing in this Law prevents the Court from refusing to take an action governed by this Law if the action would be manifestly contrary to the public policy of this state”.
This difference was considered in the earlier High Court decision of Justice Aedit Abdullah Re Zetta Jet Pte Ltd and others [2018] 4 SLR 80 (Re Zetta Jet), where Justice Abdullah reasoned that the omission of the word “manifestly” must have been deliberate and conscious, meaning that the standard of exclusion on public policy grounds must have been intended by Parliament to be lower in Singapore than in jurisdictions adopting the UNCITRAL Model Law’s precise wording.
Relying on this reasoning, the Greylag Entities argued that the lower threshold had been met on the facts as the PKPU Proceedings and voting on the Composition Plan were conducted without: (i) the equitable treatment of creditors; and (ii) adequate information disclosure.
The SICC chose to depart from Justice Abdullah’s reasoning in Re Zetta Jet. While it accepted that the omission of the word “manifestly” was deliberate, this was, in its view, insufficient to conclude that Parliament intended a lower threshold. The SICC reasoned as follows:
In any event, the Greylag Entities’ objections premised on public policy were held to be factually and legally unsustainable as there were no actual concerns of due process and the arguments raised were in substance, directed at the content of substantive Indonesian insolvency laws and the merits of the Homologation Decision.
1. Recognition of Foreign Orders
The SICC affirmed Justice Aedit Abdullah’s decision in Re Tantleff, Alan [2023] 3 SLR 250 that Article 21(1) of the Third Schedule permits the recognition and enforcement of a foreign restructuring order (including a court order sanctioning a restructuring plan), in alignment with the position under Chapter 15 of the US Bankruptcy Code. In doing so, the SICC similarly declined to follow the approach of the UK Supreme Court in Rubin v Eurofinance SA [2012] 3 WLR 1019, which held that the Model Law was not designed to provide for the reciprocal enforcement of judgments and that Article 21 was concerned with procedural matters only.
However, the SICC clarified that the proper legal basis for recognition and enforcement of a foreign restructuring plan or court order is under the chapeau of Article 21(1), namely, the limb of “any appropriate relief”, and not Article 21(1)(g) which provides for “any additional relief that may be available to a Singapore insolvency officeholder”, noting that:
(a) Nothing in the IRDA confers on Singapore insolvency officeholders the power to apply for the recognition and enforcement of such foreign plans and orders; and
(b) This was consistent with the approach adopted in US jurisprudence which relied on the chapeau of the US equivalent to Article 21 (i.e., § 1521 of the US Bankruptcy Code) as the proper legal basis for granting such relief. While there were several US cases adopting a different approach, these cases were in the minority and should not be persuasive in Singapore.
2. Disavowal of the Gibbs Rule
The SICC also affirmed the analysis in the earlier High Court decision of Re Pacific Andes Resources Development Ltd and other matters [2018] 5 SLR 125 (Re Pacific Andes) which examined the soundness of the rule emerging from the English Court of Appeal decision in Antony Gibbs & Sons v La Société Industrielle et Commerciale des Métaux (1890) 25 QBD 399 (Gibbs Rule).
The Gibbs Rule provides that a discharge of a debt is not effective unless it is in accordance with the law governing the debt (i.e., an English law debt cannot be compromised by any law other than English law). The SICC affirmation of the analysis in Re Pacific Andes confirms that the Gibbs Rule is outdated and needs to be reformulated.
Re PT Garuda provides welcome guidance as to the scope and applicability of the public policy exception in Singapore.
Thus far, the exception has never been successfully invoked save for in the case of Re Zetta Jet, where there was non-compliance with a Singapore court order granting an injunction, and even then, limited recognition was granted to permit the foreign representative to apply to set aside the injunction.
Re PT Garuda helpfully cites a few other examples, namely:
The SICC also tentatively suggested that the exception may be engaged where the foreign insolvency proceedings or court orders are tainted by fraud. However, the extent of tainting or evidence of fraud required to engage concerns of public policy on this ground remains to be seen.
More generally, the SICC’s heavy emphasis on the objective and purpose of the UNCITRAL Model Law and the fundamental concepts of modified universalism and international comity is highly instructive on the approach to be taken in interpreting the Singapore Model Law. In this connection, stakeholders ought to bear in mind the SICC’s observation that courts must be sensitive to procedural and substantive differences between domestic insolvency laws and foreign insolvency laws. The fact that foreign insolvency laws and procedures operate differently from what is normally expected and experienced in the domestic insolvency regime cannot, without more, give rise to a finding that the foreign proceeding is contrary to Singapore public policy.
Separately, the Greylag Entities’ failure to explain why the alleged lack of due process were not raised earlier in the Indonesian proceedings was considered by the SICC as speaking to the absence of the merits of these alleged concerns. The result for creditors is that any concerns of due process, if legitimate, should be raised at the earliest possible juncture in the appropriate forum to avoid such concerns being viewed as an afterthought when raised at a later stage before a recognition court.
Finally, the SICC’s confirmation that foreign restructuring plans and orders can be granted recognition in Singapore and the proper legal basis to do so is also a welcome clarification on the law in this area, which confirms a further tool which foreign debtors can rely on in the restructuring process.
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